AOL Time Warner VenturesAOL Time Warner Ventures

Presentation to Federal Reserve ConferencePresentation to Federal Reserve ConferenceMay 3, 2002May 3, 2002

Ronald H. Peele, Vice PresidentRonald H. Peele, Vice President

Presentation to Federal Reserve ConferencePresentation to Federal Reserve ConferenceMay 3, 2002May 3, 2002

Ronald H. Peele, Vice PresidentRonald H. Peele, Vice President

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Presentation AgendaPresentation Agenda

I.I. Investing ThemesInvesting Themes

II.II. Driving Strategic ValueDriving Strategic Value

III.III. Lessons LearnedLessons Learned

IV.IV. SummarySummary

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I. Investing ThemesI. Investing ThemesI. Investing ThemesI. Investing Themes

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The Ventures group has targeted its investments in areas strategic to AOLTW.The Ventures group has targeted its investments in areas strategic to AOLTW.

Convergence• Devices• Home Networking• Integrated Services• VoIP/Voice Commerce

Interactive Multi-Media Platforms• Broadband• VOD/PVR/iTV• Content Digitization/ Delivery• Streaming• DRM/ DAM/ MAM

Ubiquity• AOL Anywhere• Wireless• Other Access Devices

Personalization and Productivity• Search• Community

Operating Efficiencies• Network Infrastructure• Enterprise Software • Security and Storage• Billing Systems

AOLTWVentures

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The Ventures group has refined its strategic investing themes through an ongoing screening process.

The Ventures group has refined its strategic investing themes through an ongoing screening process.

AOLTWAOLTWVenturesVentures

InternationalInternational VC’sVC’s

StrategicStrategicInvestingInvestingThemesThemes

US VC’sUS VC’s

CorporateCorporateInvestorsInvestors

AOLTWAOLTWOperatingOperating

BusinessesBusinesses

IndustryIndustry PlayersPlayers

Office of CTOOffice of CTOInvestmentInvestment

Cmte.Cmte.

AOLTWAOLTWStrategy GroupStrategy Group

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II. Driving Strategic ValueII. Driving Strategic ValueII. Driving Strategic ValueII. Driving Strategic Value

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AOLTW Ventures drives strategic value from investments in a number of ways.AOLTW Ventures drives strategic value from investments in a number of ways.

• Screen and introduce innovative companies to AOLTW.

• Secure funding to stabilize and strengthen prospective partners.

• Monitor industry developments and transfer information to AOLTW.

• Facilitate and champion technology trials.

• Steer or prioritize research or product direction.

• Position AOLTW for favorable operating deals.

• Preserve flexibility in business relationships with prospective partners.

• Screen and introduce innovative companies to AOLTW.

• Secure funding to stabilize and strengthen prospective partners.

• Monitor industry developments and transfer information to AOLTW.

• Facilitate and champion technology trials.

• Steer or prioritize research or product direction.

• Position AOLTW for favorable operating deals.

• Preserve flexibility in business relationships with prospective partners.

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III. Lessons LearnedIII. Lessons LearnedIII. Lessons LearnedIII. Lessons Learned

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AOLTW Ventures constantly monitors the market, gathers intelligence, and identifies lessons learned.

AOLTW Ventures constantly monitors the market, gathers intelligence, and identifies lessons learned.

• Internal ConstituenciesInternal Constituencies

– Formal presentations to operating groups.Formal presentations to operating groups.

– Identified key contacts and established feedback mechanisms.Identified key contacts and established feedback mechanisms.

• External ConstituenciesExternal Constituencies

– Met with fund investment managers and agreed upon feedback Met with fund investment managers and agreed upon feedback mechanisms. mechanisms.

– Presentations and meetings to other VC Funds.Presentations and meetings to other VC Funds.

• Existing Portfolio InvestmentsExisting Portfolio Investments

– Constantly reassess successes and failures.Constantly reassess successes and failures.

– Periodic review with corporate finance group.Periodic review with corporate finance group.

• Internal ConstituenciesInternal Constituencies

– Formal presentations to operating groups.Formal presentations to operating groups.

– Identified key contacts and established feedback mechanisms.Identified key contacts and established feedback mechanisms.

• External ConstituenciesExternal Constituencies

– Met with fund investment managers and agreed upon feedback Met with fund investment managers and agreed upon feedback mechanisms. mechanisms.

– Presentations and meetings to other VC Funds.Presentations and meetings to other VC Funds.

• Existing Portfolio InvestmentsExisting Portfolio Investments

– Constantly reassess successes and failures.Constantly reassess successes and failures.

– Periodic review with corporate finance group.Periodic review with corporate finance group.

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Corporate Investing Lessons Learned – External RelationshipsCorporate Investing Lessons Learned – External Relationships

• Institutional VC’s are hesitant to work with corporate investors who are slow to Institutional VC’s are hesitant to work with corporate investors who are slow to make decisions and secretive about their investing rationale.make decisions and secretive about their investing rationale.

– Approval process is nimble, streamlined, timely, and does not require sign-off from an Approval process is nimble, streamlined, timely, and does not require sign-off from an operating division.operating division.

• Unlike Institutional VC’s who are driven purely by financial performance, Unlike Institutional VC’s who are driven purely by financial performance, corporate investors are often perceived to demonstrate unfocused investing corporate investors are often perceived to demonstrate unfocused investing criteria.criteria.

– AOLTW Ventures’ investment focus is re-enforced through our investing discipline and AOLTW Ventures’ investment focus is re-enforced through our investing discipline and consistent message to the market.consistent message to the market.

• The strategic value of many corporate investors is diminished by an absence of The strategic value of many corporate investors is diminished by an absence of post-investment support.post-investment support.

– AOLTW Ventures works diligently with management, other investors, and operating AOLTW Ventures works diligently with management, other investors, and operating divisions to derive value and maximize the companies’ attractiveness to AOLTW after divisions to derive value and maximize the companies’ attractiveness to AOLTW after an investment is funded. an investment is funded.

• Institutional VC’s are hesitant to work with corporate investors who are slow to Institutional VC’s are hesitant to work with corporate investors who are slow to make decisions and secretive about their investing rationale.make decisions and secretive about their investing rationale.

– Approval process is nimble, streamlined, timely, and does not require sign-off from an Approval process is nimble, streamlined, timely, and does not require sign-off from an operating division.operating division.

• Unlike Institutional VC’s who are driven purely by financial performance, Unlike Institutional VC’s who are driven purely by financial performance, corporate investors are often perceived to demonstrate unfocused investing corporate investors are often perceived to demonstrate unfocused investing criteria.criteria.

– AOLTW Ventures’ investment focus is re-enforced through our investing discipline and AOLTW Ventures’ investment focus is re-enforced through our investing discipline and consistent message to the market.consistent message to the market.

• The strategic value of many corporate investors is diminished by an absence of The strategic value of many corporate investors is diminished by an absence of post-investment support.post-investment support.

– AOLTW Ventures works diligently with management, other investors, and operating AOLTW Ventures works diligently with management, other investors, and operating divisions to derive value and maximize the companies’ attractiveness to AOLTW after divisions to derive value and maximize the companies’ attractiveness to AOLTW after an investment is funded. an investment is funded.

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• Corporate investing groups can often be perceived as a threat to operating Corporate investing groups can often be perceived as a threat to operating divisions.divisions.

– AOLTW Ventures is positioned to be complementary to operating divisions, AOLTW Ventures is positioned to be complementary to operating divisions, succeeding only when they succeed and demonstrating a good record of value succeeding only when they succeed and demonstrating a good record of value creation.creation.

• Communication among operating divisions and corporate investing groups is Communication among operating divisions and corporate investing groups is often diminished or lacking altogether.often diminished or lacking altogether.

– AOLTW Ventures actively engages divisions to refine its understanding of their AOLTW Ventures actively engages divisions to refine its understanding of their priorities and strategic directions and works with appropriate AOLTW functional and priorities and strategic directions and works with appropriate AOLTW functional and operating groups to facilitate mutual information flow.operating groups to facilitate mutual information flow.

• Corporate investing groups can impose an undue burden on operating Corporate investing groups can impose an undue burden on operating divisions, disrupting their ability to accomplish necessary operating goals.divisions, disrupting their ability to accomplish necessary operating goals.

– While AOLTW Ventures maintains an active dialogue with operating groups, we are While AOLTW Ventures maintains an active dialogue with operating groups, we are “easy to work with,” interacting only when appropriate and necessary, and providing “easy to work with,” interacting only when appropriate and necessary, and providing cross-divisional intelligence to operating groups.cross-divisional intelligence to operating groups.

• Corporate investing groups can often be perceived as a threat to operating Corporate investing groups can often be perceived as a threat to operating divisions.divisions.

– AOLTW Ventures is positioned to be complementary to operating divisions, AOLTW Ventures is positioned to be complementary to operating divisions, succeeding only when they succeed and demonstrating a good record of value succeeding only when they succeed and demonstrating a good record of value creation.creation.

• Communication among operating divisions and corporate investing groups is Communication among operating divisions and corporate investing groups is often diminished or lacking altogether.often diminished or lacking altogether.

– AOLTW Ventures actively engages divisions to refine its understanding of their AOLTW Ventures actively engages divisions to refine its understanding of their priorities and strategic directions and works with appropriate AOLTW functional and priorities and strategic directions and works with appropriate AOLTW functional and operating groups to facilitate mutual information flow.operating groups to facilitate mutual information flow.

• Corporate investing groups can impose an undue burden on operating Corporate investing groups can impose an undue burden on operating divisions, disrupting their ability to accomplish necessary operating goals.divisions, disrupting their ability to accomplish necessary operating goals.

– While AOLTW Ventures maintains an active dialogue with operating groups, we are While AOLTW Ventures maintains an active dialogue with operating groups, we are “easy to work with,” interacting only when appropriate and necessary, and providing “easy to work with,” interacting only when appropriate and necessary, and providing cross-divisional intelligence to operating groups.cross-divisional intelligence to operating groups.

Corporate Investing Lessons Learned – Internal RelationshipsCorporate Investing Lessons Learned – Internal Relationships

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SummarySummary

• Tuned into AOLTW’s strategies and market trends.Tuned into AOLTW’s strategies and market trends.

• Actively investing in companies that improve our competitive positioning and Actively investing in companies that improve our competitive positioning and business prospects.business prospects.

• Practicing disciplined and proactive portfolio management to mine and Practicing disciplined and proactive portfolio management to mine and manage strategic value from portfolio companies.manage strategic value from portfolio companies.

• Applying lessons learned every step of the way.Applying lessons learned every step of the way.

• As a corporate investor with rich resources (i.e., great brands and wide As a corporate investor with rich resources (i.e., great brands and wide subscriber base), a crisp investing strategy, and an experienced team, AOLTW subscriber base), a crisp investing strategy, and an experienced team, AOLTW Ventures is well-positioned to capitalize on current venture investment Ventures is well-positioned to capitalize on current venture investment opportunities.opportunities.

• Tuned into AOLTW’s strategies and market trends.Tuned into AOLTW’s strategies and market trends.

• Actively investing in companies that improve our competitive positioning and Actively investing in companies that improve our competitive positioning and business prospects.business prospects.

• Practicing disciplined and proactive portfolio management to mine and Practicing disciplined and proactive portfolio management to mine and manage strategic value from portfolio companies.manage strategic value from portfolio companies.

• Applying lessons learned every step of the way.Applying lessons learned every step of the way.

• As a corporate investor with rich resources (i.e., great brands and wide As a corporate investor with rich resources (i.e., great brands and wide subscriber base), a crisp investing strategy, and an experienced team, AOLTW subscriber base), a crisp investing strategy, and an experienced team, AOLTW Ventures is well-positioned to capitalize on current venture investment Ventures is well-positioned to capitalize on current venture investment opportunities.opportunities.